News

Earlier this year the proposed regulations updating deadlines and ending good faith relief for Affordable Care Act (ACA) reporting became law. (See Federal Register : Information Reporting of Health Insurance Coverage and Other Issues)

Among other things, the regulations require that:

• The deadline for furnishing IRS Forms 1095-C to employees will be March 2 (or March 3 in a leap year) – which is 30 days more than what was previously allowed; and
• The transitional “good faith relief” for employer ACA reporting would no longer apply to tax years after 2020.

When an employee who has a balance in their health reimbursement arrangement (HRA) terminates from the plan (either due to termination of employment or any other reason that would cause them to lose eligibility, like a reduction in hours), the employer is not permitted to “cash out” the HRA. In other words, the employer is not allowed to provide cash or other benefits in an amount equal to some or all of the HRA balance. This is because cashing out would trigger taxation of all HRA distributions, even if they were used to pay qualified medical expenses.

On June 22, 2022, Philadelphia Mayor Jim Kenney, signed the Employee Commuter Transit Benefit ordinance. The ordinance takes effect on December 31, 2022, and requires employers with 50 or more covered employees to provide commuter transit benefits for their workers.

Flexible Spending Account (FSA) plans must be designed to meet the requirements defined in federal tax code, but employers have several opportunities to choose features that best fit the needs of their organization.

September 27, 2022

In light of the security and privacy incidences we hear about in the news on a daily basis, it seems to be a good time to highlight Cyber Security in this quarter’s Compliance Watch. On March 21, 2022, President Joe Biden gave an official statement regarding Russian cyberattacks against the U.S. — making his most prominent alert yet about what he called new intelligence concerning the Putin regime’s plans.

The IRS has released a draft 2022 Form 8606, Nondeductible IRAs. Form 8606 is filed by taxpayers who have made nondeductible Traditional IRA contributions for 2022, and by taxpayers who have made nondeductible Traditional IRA contributions in previous years and have taken distributions from a Traditional, SEP, or SIMPLE IRA in 2022 or converted part of their Traditional, SEP, or SIMPLE IRAs to Roth IRAs in 2022.

Senators Ron Wyden (D-OR) and Mike Crapo (R-ID), Senate Finance Committee Chair and Ranking Member, have introduced S.4808, the Enhancing American Retirement Now (EARN) Act. As previously announced, the Senate Finance Committee unanimously approved the bill in June based upon an outline released at that time.

Changes in the legislative text from the June outline include:

• Individuals age 60 or older could start making higher catch-up contributions in 2025 (versus 2024).
• Employees with wages below $100,000 could make catch-up contributions on a pretax or Roth basis. Employees with wages exceeding $100,000 would still be required to be make catch-up contributions on a Roth basis.
• The option to treat employer contributions as Roth contributions would be available starting in 2023 (versus 2024).

While it is unclear whether the bill will be brought to a stand-alone vote with the Senate’s limited number of sessions for the remainder of the year, congressional observers anticipate that the EARN Act will be consolidated with the Senate Health, Education, Labor and Pensions (HELP) committee’s RISE & SHINE Act and the Securing a Strong Retirement Act of 2022, which was passed by the House of Representatives. It appears that a final bill will likely receive a vote this year after the November mid-term elections.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storms in Arizona. The tax relief postpones various tax filing deadlines that began July 17, 2022. Affected individuals and households who reside or have a business in the Salt River Pima-Maricopa Indian Community, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after July 17, 2022, and before November 15, 2022, will have until November 15, 2022, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after July 17, 2022, and before November 15, 2022.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.

The Department of Labor (DOL) is extending the comment period for receiving written comments related to prohibited transaction class exemption 84-14 (the Proposed QPAM Amendment) to October 11, 2022. The DOL also intends to hold a public hearing on November 17, 2022, at which time a supplementary comment period will begin, and close approximately 14 days after the hearing transcript is posted on the EBSA’s web page.

Details of the proposed amendment were previously announced.

The IRS has provided additional guidance related to federal income tax withholding requirements for retirement plan and IRA payments. As previously shared, new Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions, may be used in 2022 and must be used starting in 2023 for any nonperiodic distributions. Updated Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments, is now to be used only for periodic pension or annuity payments. The IRS has attempted to answer some of the outstanding questions regarding use of the new forms.

With regard to the use of electronic substitutes to paper Forms W-4P and W-4R, the IRS references Publications 15-A, Employer’s Supplemental Tax Guide, and 15-T, Federal Income Tax Withholding Methods, for general guidelines but does provide a few clarifications

• Payers that electronically store payee personal information and accept withholding elections through an account tied to the payee are not required to have the payee submit the information again when completing an electronic substitute to Forms W-4P and W-4R
• References to page numbers, when not applicable to the substitute form, should be replaced by appropriate references
• An electronic substitute to Form W-4R can provide a link to a web page containing marginal tax rate tables as long as certain text and instructions are provided

The IRS also indicates that when providing paper substitute forms for Forms W-4P and W-4R, payers should generally follow the same guidelines that apply for electronic substitutes, with the exception that the substitute form must include applicable instructions and worksheets rather than providing a web address.

The IRS confirms that telephonic substitutes for Forms W-4P and W-4R are permitted and intends to issue additional guidance. In the meantime, brief scripting specific to three Form W-4R scenarios are provided, and the IRS specifies the Form W-4P content that should be scripted as well.

And finally, the IRS clarifies that for payers using electronic or paper substitutes for Forms W-4P and W-4R, compliance with the updated forms must occur by the later of January 1, 2023, or 30 days after the IRS releases the final versions of the 2023 Forms W-4P and W-4R.